Aer Lingus to be sold?

[ORAC]

Thursday, April 07 08:59:01
(BizWorld): Cullen set to sell 51pc of Aer Lingus?

The Minister for Transport, Mr Cullen, has opted to sell off 51pc of Aer Lingus, according to a media report this morning.

The Minister is also expected to give the Dublin Airport Authority the go-ahead to build a second terminal at Dublin Airport.
The airline is currently in discussions with manufacturers Airbus and Boeing about acquiring between 10 and 11 new long-haul aircraft.

It is understood that based on a valuation of just under E600m, the Government would have to sell over 50 per cent to draw down the E300 m required to complete a long-haul deal with Boeing or Airbus.

Minister Cullen will present Cabinet with his proposals next Tuesday, according to a report in this morning's Irish Independent.

[Piltdown Man]

So Ryannair are going long haul then...

[akerosid]

Nothing in the Indo article about the stopover. It's also expected that there will be some movement on this; Cullen indicated as much recently. If they don't, the potential for selling EI at a decent price may be undermined.

If they could just move the ratio of flights from DUB:SNN to a more realistic ratio (or better still get rid of it), that would be welcome.

Once EI knows exactly what's happening with the stopover, it will be in a better position to proceed with its long haul fleet plan.

[Bearcat]

And who is the most suitable propective shareholder? yeep you guessed it .BA....to be headed by an ex AL man. Something quick needs to sorted with AL. No cx for ages, no long haul plan at the moment and those A330s are tired.

[MarkD]

A lot of assumption that the sale would be to another airline (BA) - not necessarily so. I wouldn't be surprised if the eventual aim was to float EI - a lot of pension fund money sloshing around Ireland looking for opportunities, and therefore a lot of that money is going abroad.

Apart from some LHR slots (which the Irish government are not going to want to see serving non-Irish destinations) I can't see what's in it for BA to buy EI. Their 320s are CFMs, they don't have any Boeing longhaulers and BA has GB to do bucket and spading. The only motivation I can think of is to stop EI leaving oneworld for a competing alliance.

[BOAC]

Well, IF BA did do it, then WW could.........................run Aer Lingus:D

[Irish Steve]

The Minister is also expected to give the Dublin Airport Authority the go-ahead to build a second terminal at Dublin Airport.

Worse!!! If I read it correctly, DAA are going to get the extension on the existing terminal AND the second terminal. Recipe for disaster, given the track record to date of Aer Rianta!!!

It's hard to believe that the Irish Economy is one of the fastest growing in Europe, if the chaos that surrounds both Aer Lingus & Dublin airport is looked at in any detail!!!

[RevMan2]

Have it on v. good authority that LH is to use bmi as proxy purchaser

[akerosid]

I thought Lufty was trying to get rid of its holding in BMI, having declined to take up its option to buy the company. This being the case, why would they want to use BD as their proxy; why not buy EI directly themselves?

It'll be interesting to see, once all the SNN nonsense is done away with, how many (if any) airlines decide to use their right to fly n/s from DUB to the US. Experience of the last 10 years or so of EU Open Skies suggests not too many, but it wouldn't surprise me if Virgin, for example, set up an Irish operation. Possibly LH as well?

I agree with your point, Irish Steve. My big fear here is that we're only staving off the day when a much larger midfield terminal will be needed. I suspect that the DAA chose the North Apron site purely because it didn't have enough land of its own, west of 16/34, to build a terminal (the required land being owned by either McEvaddy or McNamara); we will, one day, have a terminal on this land.

According to the reports I've seen, the possibility of another company operating the new terminal in "competition" against the DAA hasn't been ruled out. How effective that competition would be, I don't know. In a sense, it might be a double edged sword in that if it IS very effective, the new terminal will reach capacity a lot sooner than planned. If lessons are to be learned (no, seriously!) from the current problems at DUB, the planning, authorisation and building of future capacity must be scheduled for long before the current/existing facilities are at capacity.

[MarkD]

akerosid

could be that BD+EI (a small version of KL+AF) with pooled LHR slots and equipment would gain enough value to be worth disposing of the BD stake.

just had a google - BD use IAE engines on their 32x series and Trents on the 332s so not complete commonality but down the road there might be some combined purchasing power. There might be problems with EI/BD having 100% monopoly of LHR-DUB unless BA restarted service.

LH/BD will have to move fast as according to the Irish Independent an institutional IPO is planned for EI.

[newscaster]

Why dont EI fly to Malta and Greece?

[LGS6753]

I don't see LH buying EI. They will be too busy digesting Swiss.

[akerosid]

Fair point, LGS6753; I'd actually forgotten that!

I think an institutional placement is really the most likely, but I think that this is by no means a given. To repeat my earlier point, it's very important for the sale of Aer Lingus to be handled right. Unfortunately, the govt's handling of aviation matters has been pretty poor and it needs to work to develop confidence. If it comes up with something which doesn't do that, the markets may well say, "don't buy". They don't want excuses, like "the EU won't let us renegotiate the bilateral"; the time for that kind of nonsense is gone.

The airline also needs to be able to attract a good quality CEO; with all due respect to the people within EI, I wonder if the appointment of an internal candidate might suggest that the external candidates weren't happy with what the gov't was prepared to commit to; that said, I understand that Alan Joyce was given some assurances (and in fairness, he pulled out for personal reasons). Having an internal candidate is no bad thing; WW was, after all, internal. However, it may be easier for someone with a known and proven track record to create the right investment environment.